An irreverent Wall Street Blog
Money For Nothing And The Stocks Are Free (Sort of)
October 5, 2015
Pssst . . . c'mere, yeah, you. Just sit
down, quietly, don't draw any attention to us. Okay, great, look, I'm working
this deal. Gonna make us both a nice chunk of change. You know what I'm saying?
What I got goin' here is simple: I buy shares for cash, use those purchased
share to collateralize the loan that gets me the cash for those shares, and
then we sell the shares and pay off the lender. Everyone makes money. You look
like a sharp guy. Can I count you in?
Case In
Point
On the morning of August 7,
2013, Steven Staltare, then 48 of Land O' Lakes, FL, was arrested pursuant to a
criminal Complaint; thereafter, on September 10,
2013, an Indictment was filed against
Staltare charging him with two counts of securities fraud
and two counts of wire fraud. On December 2, 2014, Staltare pled
guilty.
Let's
take a short trip, back in time, to see how Staltare got himself into this
legal bind.
A Matter
of Restriction
Around 2007, an
unfortunate individual (we'll call him Victim 1) had paid Staltare about
$14,000 for 365,000 shares of NASDAQ listed Dematco Inc. By 2009, however,
Victim 1 learned that those shares were restricted and could not be freely
sold. In late 2011, Staltare comes to the rescue with a proposal to have a
supposed partner of his buy Victim 1's shares for $70,000 - a tidy profit, or
so it seemed.
15 Gets Ya 20 . . . and
then some!
Apparently confident of
obtaining Victim 1's shares for $70,000, Staltare then approached Victim 2 and
asked to borrow about $150,000 for the purpose of buying Dematco shares.
Staltare promised to pay Victim 2 $200,000 in three weeks with the kicker of
1/3 of the profits -- and the whole loan
would be collateralized with shares of Dematco. The simple math is that Staltare borrowed
$150,000 to buy shares that he has arranged to purchase of $70,000 - tough to
lose on that transaction.
Surprise!
After making the loan, imagine
Victim 2's surprise when he subsequently learned that the collateral he held
were restricted shares and not freely tradeable. A little
oversight in Staltare's pitch.
Quite the
Consultant
The
Indictment asserts that during the relevant
times, Staltare had represented himself as a consultant with
contacts at various companies and as President of "Worldwide Marketing Group,"
of Tampa, FL. In fact, Staltare took the victims' funds and largely used
the money to pay his and his family's personal expenses such as mortgage
payments, credit cards, car payments, and meals at
restaurants.
Unfortunately, Staltare never
paid the $70,000 purchase price to Victim 1 and never repaid the $150,000 loan
or paid any portion of the promised 1/3 profits to Victim 2. Victim 2 did get the Dematco shares as
collateral; however, they were essentially stolen from Victim 1 because
Staltare never tendered the promised purchase price.
New And
Improved
Moving on to 2012 through 2013,
Staltare runs another version of the earlier scam but expands the shares to
include Dematco, Preventia, Inc., First Choice Healthcare Solutions, Inc.(all
NASDAQ Stock Market listed companies), and Savtira Corporation (a privately
held company). In this second version of the scam, Staltare persuaded Victim 3
to invest $25,000 in Preventia stock with promises of significant returns. We
also have Victim 4, who was persuaded to invest $357,000 in Dematco, Preventia,
First Choice, and Savtira, again with the same promises of big returns. Once
again, Staltare basically took the money and ran.
From Con
Artist to Con
On September 29,
2015, Staltare, now 50, was sentenced to 77 months in prison, ,three years of
supervised release, ordered to forfeit $846,250, and ordered to pay restitution
of $846,250 to victims of his
offenses.
Bill Singer's
Comment
Ummm . . . lemme
explain a little sumthin' here. I've held it back for effect. Dramatic
foreshadowing you might say.
If someone - anyone - had
checked into Staltare's history, they would have found stories like this
one:
"Convicted Four Times, Man Charged Again" (Bloomberg News, by David Glovin, August 11, 2004)
In the
Cannon criminal prosecution, Staltare pled guilty to 2
counts of securities fraud and was sentenced to 32 months in prison for
securities fraud and three years of supervised release. Further, Staltare was
ordered to pay $9,307,176.10 in restitution. United
States of America v. Steven Staltare (Judgment,
SDNY, October 4,
2007).
Seems that
Staltare sort of left his criminal history and incarceration out of his deal
pitches to Victims 1, 2, 3, and 4 -- and it also seems that folks didn't bother
to check him out all that carefully. Oh, and then
there's Staltare's bankruptcy filing on April 27, 2012!
Ah, yes, money for
nothing!